China’s Economy Shows Strong Recovery in Q1 2023
China’s economy grew by 4.5 percent year-on-year in the first quarter of 2023, indicating a strong recovery after the end of Beijing’s strict “zero-COVID” policies. Although the growth figure falls slightly short of Beijing’s 5 percent growth target for 2023, it is still ahead of market expectations.
Other official economic data released on Tuesday reinforced signs of an upward trend in the economy. Retail sales grew by 10.6 percent year-on-year, while value-added service output rose by 5.4 percent. Value-added industrial production rose by 3 percent year-on-year, although the Purchasing Manager’s Index dropped slightly to 51.9 from 52.6 in February. Any reading above 50 is considered an expansion.
Alicia Garcia Herrero, the chief economist for the Asia Pacific at Natixis, said that the “data was quite good,” but official figures may paint a slightly rosier picture than the reality on the ground because the benchmark is March 2022, when economic activity across China was muted due to lockdowns.
China’s economy grew by just 3 percent last year, the second lowest rate since 1976, amid strict pandemic measures, including border closures, mass testing, and months-long lockdowns in big cities such as Shanghai. Beijing is now trying to steer the economy through a recovery without stoking the kind of inflation seen in other countries.
China’s consumer price index grew by just 0.7 percent year-on-year in March, despite rebounding retail sales. The Communist Party has made economic stability a top priority in 2023, with a particular focus on job creation to offset high youth unemployment during the pandemic.
Beijing said earlier this year it plans to create 12 million jobs, up from 11 million this year, while pinpointing consumption as a key driver of growth. Public frustration with Beijing’s “zero-COVID” strategy and its effect on the economy sparked a wave of rare mass protests across China’s big cities in late 2022. The protests are believed to have been a deciding factor in Beijing’s abrupt decision to drop its tough pandemic strategy in December after nearly three years of strict curbs.